China prices rise 60 percent on selected staple foods; government crackdown on biofuels imminent as country struggles to avoid repeat of 1989 riots

February 18, 2008

In China, food prices have soared 60 percent on selected goods, prompting fears that food riots, similar to those which precipitated the 1989 uprising, may occur in major Chinese cities. Strong curbs on production of fuels from food crops is expected, to reduce pressure on prices, as the country emerges from an extreme cold crisis, on top of major crop failures. Tariffs of up to 25 percent have been placed on export of key biofuel feedstocks.

In recent weeks, the province of Guangxi said that a cassava (tapioca) shortage may lead it to curtail ethanol production projections for this year, and have cast doubt on the province’s plans to double production by 2010. Provincial officials originally set a production goal of 1 million tons of ethanol but is looking now at a best-case scenario of 200,000 tonnes.

Overall, China country produced 264 million gallons of ethanol, but recently imposed a moratorium on corn ethanol production because of the impact on corn prices, focusing investment on cassava, sorghum and sugarcane.

The Chinese government is drafting biodiesel blend standards and is expected to impose a 5 percent blending target by the end of the year, according to reports, and is looking at potential target dates for a 10 percent mandate. The government set a consumption target of 200,000 tons of biodiesel for 2010 and 2 million tons for 2020. China established an E10 mandate in 2002 for nine provinces, but has not extended the mandate, in part because of shortages of feedstocks.

Late last year in Shanghai, fuel riots began because of shortages.

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Written by Jim Lane · Filed Under International, The Daily Biofuel Summary